JBS in Australia was quick to support the pork industry as well as reiterate a zero tolerance for animal abuse and strong commitment to corporate governance.
All anyone can do is watch and wait.
Globally, ESG investments now account for over 25 per cent of the world’s professionally managed assets – and rising. It is part of a bigger picture of shareholder activism sweeping the market.
But after the JBS global empire bowed to criminals and paid a $US11 million ($14.6 million) ransom in response to a cyber attack against its operations that had forced a shutdown of 47 locations in Australia, and sites in the United States and Canada, JBS came to symbolise two key issues facing Australia and the world: supply chain disruption risks and the rise of ESG – environmental, social and governance – reporting and disclosure.
Supply chain disruption issues, which are currently being felt throughout the world, largely due to COVID, and to a smaller extent from cyber attacks, have amplified the dangers of too much industry concentration.
It became a clarifying moment for the US government, particularly as JBS recently settled three pork price-fixing cases in the country worth tens of millions of dollars.
In June, the US government announced a strengthening of US regulatory protections for livestock and poultry producers, including a proposal to establish a special investigator with subpoena powers to address anti-competitive practices and enforce anti-competition laws in the meat and poultry sectors.
The brutal reality is deforestation couldn’t happen without investors, customers and third party suppliers such as financial institutions.
Despite the growing discomfort of market dominance in the US, Australia’s authorities and politicians seem less concerned.
Another issue is ESG and the global shift to make it part of standard reporting practices. In some countries this is being driven by governments and regulators, while investors are driving it in other countries.
Globally, ESG investments now account for over 25 per cent of the world’s professionally managed assets – and rising. It is part of a bigger picture of shareholder activism sweeping the market.
But it raises the hoary question, where do you draw the line? It is something ESG funds, Australian superannuation funds and global asset managers will increasingly need to consider, particularly those that hold themselves up as ethical investors.
Many Australian superannuation funds invest in index funds such as Vanguard and BlackRock.
According to a report in September 2020 by US-based Friends of the Earth titled Doubling Down on Deforestation How the Big Three Asset Managers Enable Consumer Goods Companies to Destroy the World’s Forests, BlackRock, Vanguard and State Street, invest billions of dollars in companies that have contributed to the deforestation of the world’s largest rainforest, the Amazon.
The deforestation of the Amazon recently hit 12-year highs, largely due to beef production, which requires the clearance of land. One of those companies is JBS.
A spokesperson for Amazon Watch, a non-profit organisation founded 25 years ago to protect the rainforest, described JBS as “one of the world’s worst actors on deforestation and indigenous rights violations in the Amazon”.
BlackRock chairman Larry Fink says the giant funds manager has a responsibility to help clients navigate investment risk from climate change.Credit:Bloomberg
Indeed, in October this year, the New York Times reported that an audit led by prosecutors in Brazil found that between January 2018 and June 2019 JBS had bought 301,000 animals, which made up a third of its overall purchases, from farms that violated commitments to prevent illegal deforestation.
JBS attempted to downplay the audit, saying it was “impacted by a recent change in criteria adopted by the Federal Prosecution Office,” but in the same statement it agreed to improve its processes and “expand the adoption of good practices throughout the industry.”
The brutal reality is deforestation couldn’t happen without investors, customers and third party suppliers such as financial institutions.
BlackRock’s CEO Larry Fink has been vocal about his commitment to addressing climate change, urging companies to push towards a net zero economy. The world’s largest asset manager has updated its global principles and guidelines to reflect its commitment to climate and diversity. But the jury is out on
Disclosure is critical when it comes to ethical investing. Index funds need to publish their holdings and the super funds need to link to them so that Australians understand how their retirement savings are being invested.
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Vanguard’s Emerging Markets Shares Index Fund and Vanguard International Shares Index Fund both hold shares in JBS SA. A number of Australian super funds also invest in some of BlackRock’s funds, which also have an exposure to JBS SA.
In November, JBS in the US successfully announced the issue of a sustainability-linked bond, known as a green bond. It was oversubscribed as investors piled into an investment” tied to its efforts to combat climate change.”
Companies, super funds and index funds can talk the talk. But it comes back to the central question: what are investors really financing?
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